High gas prices and inflation

Oops, we did it again…

By Morf Morford

Tacoma Daily Index

High gas prices at our local pumps, inflation driving up prices of basics to atmospheric levels.

If you study economic history or you’ve lived more that a few decades, you know one thing for certain; we’ve seen this movie before.

Here’s a few reminders of where we are going based on where we’ve been.

It’s a global market

This would be a good time to restrain your well-practiced political biases.

Some of us, like a reflexive muscle, love to blame any given president (or political party) for gas prices at the pump.

As always, the global fuel economy is a bit more complicated.

Oil is bought and sold on a global market- always susceptible to vagaries of nature – like hurricanes or human disruptions like wars or other threats. Hurricane Katrina, in August of 2005, caused severe damage to U.S. refinery and production capacity in the Gulf of Mexico. Oil prices briefly spiked to above $70 per barrel before dropping after President Bush decided to release 30 million gallons from the country’s Strategic Petroleum Reserve.

As I write this, in the middle of March of 2022, the price of oil has been going up several dollars a day per barrel – and in many regions reaching the highest price ever – and looking like it will reach a price nearly double that faced by President Bush in 2005.

To say that this would destabilize a healthy economy would be an understatement.

The impacts on an economy already under stress, with demographic shifts, the Great Resignation, persistent supply chain issues and increasingly wild and unpredictable weather, gyrating oil prices can only make a volatile Wall Street and Main Street even more volatile.

To put it simply, the base of the pyramid has shifted.

Everything reliant on that base will shift as well.

As always, history never repeats exactly.

A shift away from fossil fuels, and toward electric, has been going on for some time.

For cars, airlines, even ferries, the shift toward partial, or even total, electric has been steady even if not terribly passionate.

Our love affair of the combustion engine has lasted for generations.

We identify entire eras by our cars.

The mammoth trucks and SUVs of the past few years have met their match with expensive gas.

Americans, of course, will not go down without a fight when it comes to the fuel of choice – you can expect street racing and behemoth vehicles on our streets until, suddenly – and silently – you don’t.

I remember in the years following the gas crisis of 2005, when people were literally giving away SUVs and gas-guzzling trucks.

Tiny gas-miserly vehicles soared in value, and a few electric vehicles emerged on the market (the first hybrid Prius was introduced in Japan in 1997 and worldwide in 2000).

The automobile market, of course, is directly reflexive of the cost of oil, but every item – from groceries to vacations – is predicated on the price of oil.

The “trickle-down” economics philosophy of the early 1980s was based on wishful thinking and theory over practice.

The exact opposite, “trickle-up”, will be a lesson unavoidable for each one of us who shops at a grocery store or visits a gas pump.

Perhaps our Strategic Petroleum Reserves will save us – or at least moderate our pain at the pumps.

But maybe, just maybe, we could learn something this time.

Yes, things are different this time

Much of the world, even a few Americans, are far less “dependent” on fossil fuels than a generation ago.

Individuals and industries have shifted to renewable and alternative energy sources.

Electric (or hybrid) cars are common, electric ferries are in use around the world – and even a few are, or will be, in use locally. We even have a few electric busses in operation. Electric aircraft are also in production.

Yes, electric vehicles have their own complications, but freedom from the gyrations of the oil markets is, for more and more if us, its own reward.

And, oddly enough, a revival of bicycle riding has emerged the past few years. For practical reasons as well as for pleasure, bike riding has taken a whole new level of importance for many.

Bike riding is not for everyone or for every occasion, but for more and more of us, for those short trips – or extended vacations, bicycles are a solution few of us had just a year or two ago.

For some neighborhoods, and for the Puget Sound region in general, we have a (nearly) fully operational light rail system.

In other words, more of us are, and have been, thinking about a more car-free lifestyle.

Add in the increasing number of us working from home, and you have an entirely different energy landscape from previous years.

Unlike a generation ago, we have different ways of getting around and are not all held hostage by convolutions in the global oil markets.

It didn’t need to happen

As with most accidents, wars and many crises, it didn’t need to happen. Or at least it didn’t have to be as difficult as we have made it.

Much of the “pain at the pump” is because of cutting off our oil imports from Russia. Russian oil was, at most, about 3% of our national oil imports.

Virtually none of it reached the West Coast.

The bottom line is that we never needed it.

As a mental exercise, consider the route Russian oil must take to get to North American markets; trucks, pipelines, trains, ships, and probably trucks and pipelines again.

And don’t forget terminals, storage, inspections and border crossings – each one with regulations, fees and inspections.

And each step of the process literally fueled and made possible by, you guessed it, fossil fuels.

Ocean-crossing fuel tankers, no matter how profitable (for some) are a peculiar, if not entirely counter-productive investment.

Using fossil fuels to transport fossil fuels will surely baffle business majors as well as environmental activists for generations to come.

We could have learned something from previous oil shortages. Those of us who own and drive cars could have shifted to more energy-efficient vehicles, but no, the market in ever-larger trucks grew.

That 3% or so of Russian oil being imported could have been easily eliminated by a tiny bit of relatively painless conservation over the past several years.

Using less oil and demanding more energy-efficient vehicles, appliances and manufacturing has become a practical response, no longer reserved for the tree-huggers among us.